1999 First Quarter (Preliminary) Productivity and Costs

Historical release narrative reproduced from the official public-domain source. Statistical tables, standard technical appendices, administrative material and attendance rosters are omitted; formatting is adapted for reading. Figures retain the release's historical context and may have been revised. Consult the linked source for the complete document.

First Quarter 1999

The Bureau of Labor Statistics of the U.S. Department of Labor today reported preliminary productivity data--as measured by output per hour of all persons--for the first quarter of 1999. The seasonally adjusted annual rates of productivity change in the first quarter were:

4.7 percent in the business sector and 4.0 percent in the nonfarm business sector.

These productivity gains resulted from a combination of strong output growth and modest increases in hours of all persons. Output grew 5.1 percent in the business sector and 5.0 percent in the nonfarm business sector. Hours at work increased 0.4 percent in business and 0.9 percent in nonfarm business. First-quarter measures are summarized in table A and appear in detail in tables 1 through 5.

In manufacturing, productivity changes in the first quarter were:

5.8 percent in manufacturing, 8.2 percent in durable goods manufacturing, and 2.4 percent in nondurable goods manufacturing.

Productivity growth in manufacturing in the first quarter of 1999 reflected a modest rate of increase in output (1.3 percent) and a drop in the hours of all persons (4.3 percent). Output and hours in manufacturing, which includes about 17 percent of U.S. business-sector employment, tend to vary more from quarter to quarter than data for the more aggregate business and nonfarm business sectors.

The data sources and methods used in the preparation of the manufacturing series differ from those used in preparing the business and nonfarm business series, and these measures are not directly comparable. Output measures for business and nonfarm business are based on measures of gross domestic product prepared by the Bureau of Economic Analysis of the U.S. Department of Commerce. Quarterly output measures for manufacturing reflect indexes of industrial production independently prepared by the Board of Governors of the Federal Reserve System. See Technical Notes for further information on data sources.

Business

Productivity in the business sector increased at a 4.7 percent annual rate from the fourth quarter of 1998 to the first quarter of 1999, about the same as one quarter earlier (4.6 percent). During the first quarter of 1999, output increased 5.1 percent and hours of all persons engaged in the sector rose 0.4 percent (seasonally adjusted annual rates). In the fourth quarter of 1998, output and hours grew at rates of 7.3 percent and 2.6 percent, respectively (table 1).

Hourly compensation increased 5.2 percent during the first quarter of 1999. This measure includes wages and salaries, supplements, employer contributions to employee benefit plans, and taxes. Unit labor costs, which reflect changes in hourly compensation and productivity, increased at a 0.4 percent rate during the first quarter, after declining by 0.1 percent one quarter earlier.

Real hourly compensation, which takes into account changes in the Consumer Price Index for All Urban Consumers (CPI-U), rose at a 3.7 percent annual rate in the first quarter. This was the seventh consecutive quarter in which real hourly compensation increased at least 2.0 percent (seasonally adjusted annual rate).

The implicit price deflator for the business sector, which reflects changes in both unit labor costs and unit nonlabor payments, rose 0.7 percent in the first quarter.

Nonfarm business

Productivity increased 4.0 percent in the nonfarm business sector in the first quarter, as output increased 5.0 percent and hours of all persons rose 0.9 percent. During the fourth quarter of 1998, productivity had risen 4.3 percent in this sector, reflecting gains of 7.4 percent in output and 2.9 percent in hours (table 2).

Hourly compensation increased at a 4.3 percent annual rate in the first quarter. When the rise in the CPI-U was taken into account, real hourly compensation rose 2.8 percent in the first quarter of 1999; it had increased 2.2 percent in the fourth quarter of 1998.

Unit labor costs rose 0.3 percent in the first quarter, after falling 0.4 percent in the fourth quarter of 1998. The implicit price deflator for nonfarm business output rose 1.0 percent in the first quarter, compared with a 0.2 percent rise one quarter earlier.

Manufacturing

Productivity increased at a 5.8 percent seasonally adjusted annual rate in manufacturing in the first quarter of 1999, as output increased 1.3 percent and hours of all persons declined 4.3 percent. This was the fourth consecutive quarter in which both productivity and output rose and hours fell (table 3). Productivity grew in both the durable and nondurable sectors of manufacturing, 8.2 and 2.4 percent, respectively. In durable goods manufacturing, output growth slowed to a 1.4 percent annual rate in the first quarter; this was accompanied by a substantial decline in hours at work, 6.2 percent. Nondurable goods manufacturing output rose 1.1 percent in the first quarter, and hours declined by 1.3 percent (tables 4 and 5).

Hourly compensation of all manufacturing workers rose 4.9 percent during the first quarter, and real hourly compensation rose 3.3 percent. In durable goods, hourly compensation rose 4.7 percent in the first quarter. In non- durable goods, it rose 5.4 percent.

Unit labor costs in manufacturing fell 0.9 percent in the first quarter of 1999, as unit labor costs of durable-goods producers declined 3.2 percent, and those of nondurable-goods producers grew at a 2.9 percent annual rate. Unit labor costs in total manufacturing have fallen in 23 of the last 31 quarters.

Fourth-quarter and annual measures for nonfinancial corporations

Fourth-quarter and annual 1998 measures of productivity and costs also were announced today for the nonfinancial corporate sector (tables B, C, and 6). Output per all-employee hour rose 3.3 percent from the third to the fourth quarter of 1998, as output increased 5.5 percent and employee hours rose 2.1 percent. This rate of growth was lower than in the third quarter, when productivity increased 4.4 percent, as output climbed 6.1 percent and all-employee hours rose 1.7 percent (seasonally adjusted annual rates). The sector includes all corporations doing business in the United States, except those classified as depository institutions, nondepository institutions, security and commodity brokers, insurance carriers, regulated investment offices, small business investment offices, and real estate investment trusts.

Hourly compensation increased 4.2 percent in the fourth quarter, and real hourly compensation rose 2.4 percent. Unit labor costs increased 0.8 percent in the fourth quarter, compared with a 0.3 percent decline in the third quarter. Total unit costs rose 1.6 percent during the fourth quarter, after having declined 0.4 percent during the third quarter. In the fourth quarter, unit profits fell 12.9 percent. Unit profits had risen 3.6 percent during the third quarter of 1998. The implicit price deflator for nonfinancial corporate output fell 0.4 percent during the fourth quarter of 1998.

In calendar year 1998, productivity grew 3.0 percent in nonfinancial corporations (table C). This was the largest increase since 1984, when it rose 3.1 percent. Output grew 5.6 percent in 1998, less than it had one year earlier, when it grew 6.1 percent. Hours of employees in nonfinancial corporations grew 2.6 percent during 1998, compared with 3.6 percent one year earlier.

Hourly compensation increased 4.1 percent in 1998, the largest increase since a 4.5 percent rise in 1992. Real hourly compensation rose 2.5 percent in 1998, more than in any year since 1986, when it increased 3.1 percent.

Total unit costs rose 0.6 percent in 1998, reflecting an increase of 1.1 percent in unit labor costs and a 1.0 percent drop in unit nonlabor costs. Unit profits for the year declined 4.6 percent in 1998, the first decrease since a 0.8 percent drop in 1991.

REVISED MEASURES

Current and previous measures for the fourth quarter of 1998 for the business, nonfarm business, and manufacturing sectors are compared in table D. Some of the quarterly movements differ from those reported on March 9, based on information then available.